oasting more than US$27 billion in revenues and more than 4,200 employees at such firms as Kindred Healthcare, Res-Care, Pharmerica and Humana, Louisville's aging-care sector is healthy and growing healthier with the March 2010 announcement that Signature HealthCARE is moving to town from South Florida, after considering locations in West Palm Beach and Nashville.
The company will eventually create 120 new Kentucky jobs with an average annual wage exceeding $75,000, exclusive of benefits, and will invest nearly $5.4 million in a new headquarters in a former Sears building it has purchased on Bluegrass Parkway on the city's eastern outskirts.
At the same time, in addition to a think tank on geriatric care issues to be housed at that 65,630-sq.-ft. (6,097-sq.-m.) headquarters, Signature will co-invest with the University of Louisville's Nucleus project in a new International Center for Long-Term Care (LTC) Innovation, an incubator located on university property that has been looking for the spark to its redevelopment for many years. The innovation center will be led by President and CEO John Reinhart, who was working for Signature as a consultant when the company launched its site search.
As the country's first long-term care innovation center, the center will house and assist in the development of early-stage health technology and services companies seeking to bring new ideas to the aging care industry. The center may in turn spark development of a new building on Nucleus property.
"The university has one of the more lenient policies for inventors," says Vickie Yates Brown," a healthcare attorney who was named two years ago to the posts of president and CEO at Nucleus. "The university owns the IP, but is generous in how it licenses the IP, and deliberate in order to encourage the inventors to be here."
Greater Louisville Inc. and its partner organizations first considered aging care as a specialty as a result of a 2006 study analyzing the community's healthcare footprint. But the focus on it has only ratcheted up in the past year or so, and Signature is the first real "win" attributable to the effort, says Eileen Pickett, senior vice president, community and economic development, Greater Louisville Inc.
The Kentucky Economic Development Finance Authority preliminarily approved Signature HealthCARE for up to $4 million in tax incentives over a 10-year period through the Kentucky Business Investment (KBI) program.
"Kentucky did a nice job of combining a lot of different features of their incentives," says Reinhart, noting that Florida has little to offer companies already in state, and that while the Tennessee package was more aggressive up front, Kentucky's ended up being more aggressive overall. He makes particular mention of KBI, because it allows the company to recoup a wage assessment through a state income tax credit whether the employees are transferred or newly hired, "so we start recovering the incentive packages quickly."
Though both Louisville and Nashville boast strong healthcare industries, says Reinhart, Louisville is home to more companies in Signature's particular sub-sector. Also, he says, Tennessee's incentives "are based on taxable entities. Our industry is built on stand-alone entities that roll up, but not in the same way. So the advantages of their tax incentives were limited based on the structure of long-term care."
Only two years old, Signature HealthCARE is founded on three main organizational pillars: "intra-preneurship," learning, and spirituality. Its mission is to "radically transform long term care in the U.S. through resident-centered care and employee empowerment."
The 11,000-employee firm was formed by the purchase of another company's assets, says Reinhart, and so inherited the West Palm Beach headquarters relocation. Thus the lease termination date drove a location evaluation, and drove Reinhart from his job developing the company's intra-preneurship pillar to finding where the pillars of its next headquarters would be placed.
Since Kentucky's incentives were applicable to leasing as well as purchasing a facility or a greenfield investment, the company considered leasing from the property owner NTS. "We made a decision to purchase, which goes back to one of the goals — to have a permanent home for the revolution. Also, we are a learning culture, and we have amenities built in. You can't really do that in a lease. This way, it's easier to do it the way you want it."
Signature's network of 66 long-term care skilled nursing facilities in seven southeastern U.S. states includes 17 in Kentucky and three in Louisville. Finding a home more accessible to that whole footprint was central to Signature's site selection process, which started 10 months previous to the announcement.
"All three states aggressively pursued incentivizing Signature HealthCARE to move its headquarters to their area," said the company's project announcement. "After reviewing numerous options, these three areas were chosen based upon four major criteria: quality and quantity of healthcare talent (expected growth plans), ability to expand organizationally (provide services in new states), partnerships with higher education (key for this learning company), and economic operating costs for the organization (the goal is to remain the low cost quality leader)."
The first priority was an improvement in economic costs, says Reinhart. Next: Seek a permanent home for at least the next decade. Buy-in from key stakeholders ranked next on the criteria list for this open-culture company, followed by seeking an improved quality of life for employees. Reinhart says the primary search team was composed of the CEO, CFO, chief legal counsel and the board, expanding to other senior leadership later in the process on an update-and-feedback basis. Though other areas such as Atlanta were initially considered, Palm Beach, Nashville and Louisville were the early finalist choices in large part because of their airport access and the fact that each of their home states was home to approximately 20 Signature facilities. Reinhart says it was important that back-office, support and executive leadership be close to Signature's service area.
Signature President and CEO E. Joseph Steier, III, says, "A key differentiator for the decision was the true collaborative effort of the economic development teams at both the state and local levels." Asked to illustrate, Reinhart cites a snowbound meeting day in February when all the parties interested in the innovation center were due to convene. Everybody showed up, and the alignment of company, city and state strategies couldn't have been timed better.
"The synergies were tremendous," says Reinhart. "That was the moment when we were asking, 'Are we going to get over the goal line or not?' I don't think we saw the collaboration that could have pulled that off elsewhere. In the broadest sense, it was the right time and the right cluster environment. A lot of researchers at U. of L. are in geriatrics and aging, and it just made sense to have an outlet for innovation, with a company with real-world capabilities."
That real world includes some real new ramifications from the Healthcare Act just passed in Washington.
"Long-term care will struggle with reimbursements as we go forward in the legislative environment," says Reinhart, noting that viewed in a certain light, the headquarters move was "a protectionist move for our employees."
From the viewpoint of growth prospects, however, the legislation could be good for the company they work for. Vickie Yates Brown, whose legal expertise lies in healthcare legislation, has been struggling to find the most correct version of the 2,500-page Healthcare Act. But she can say a few things with relative certainty:
"There are a number of provisions directly related to the whole aging care area," she says, admitting to being excited for Louisville's prospects even as she wades through the legislative language. "There is a lot of funding delegated to the area of long-term care," she says. Most promising is that the episodic approach to the healthcare reform measure parallels the case management and quality parameters present in Louisville's aging-care strategy.
"I see lots of opportunities based on what is in the bill," she says. "It's important that we be part of the establishing of guidelines on quality, because that's going to drive reimbursement. We're looking to revolutionize long-term care. That space is wide open now, and we can be an important driver of that."
The Most Important Asset
The move from Florida signals a homecoming of sorts for both Reinhart and Steier, both graduates of Louisville's St. Xavier High School. Reinhart jokes that both their families sure enjoyed living in Florida, but hastens to add that ensuring neutrality was important to the site selection process, and that decision-makers usually get past the weather in arriving at business decisions.
"This was the right business and culture decision," he says. "Florida is where people go to retire and vacation. But when you're building a growing company, you can imagine trying to get people in the West Palm Beach area. We had to go where the business was going to thrive, and where people could afford to live and have a great quality of life … You can't grow the company if you don't have talent."
"More than any CEO I've met, his integrity is very important to him," says GLI's Eileen Pickett of Joe Steier. "He did not want any perception that the CEO is moving the company 'home.' He's very aware of the impact this has on the families of his employees."
Compassion for its people is part of Signature's interfaith approach to spirituality in the workplace. As Steier has expressed it in a YouTube video related to a book he has recently co-authored, "The boardroom has got to hear God's voice, not Christian or Jewish, but God in general … Leaders, you have to forgive yourselves, and look at stakeholders not as liabilities but as partners."
"Integrity is of the utmost importance," says Diane Timmering on the video. She is Steier's co-author, and also serves as Signature's vice president of spirituality. "Businessmen and women are responsible for so many livelihoods. The onus is on them to do their very best by their people. God in the workplace allows that integrity to shine and flourish."
Reinhart says the company plans to use some acreage at one of its Louisville long-term care facilities to create a new center of spirituality.
For him, it's just the latest example of all the Signature pillars falling into place — in one place.